A test of the loan prohibition of the Sarbanes-Oxley Act: Are firms that grant loans to executives more likely to misstate their financial results?

Abbott, 2004, Audit committee characteristics and restatements, Auditing: A Journal of Practice and Theory, 23, 69, 10.2308/aud.2004.23.1.69 American Institute of Certified Public Accountants (AICPA), 2003, SAS 99-Consideration of Fraud in a Financial Statement Audit, Journal of Accountancy, 195, 105 Baber, W., Kang, S., Liang, L., 2005. Management entrenchment, board independences and accounting restatements. Presented at the 2005 AAA Annual Meeting, San Francisco, CA. Barnard, 1989, Corporate loans to directors and officers – Every business now a bank?, Wisconsin Law Review, 31, 237 Beasley, 1996, An empirical analysis of the relations between the board of director composition and financial statement fraud, The Accounting Review, 71, 443 Beasley, 1999, Fraudulent financial reporting: 1987–1997 Burns, 2006, The impact of performance-based compensation on misreporting, Journal of Financial Economics, 79, 35, 10.1016/j.jfineco.2004.12.003 Bush, G.W., 2002. President Announces Tough New Enforcement Initiatives for Reform. Available from: <http://www.whitehouse.gov/news/releases/2002/07/images/20020709-4_d070902-515h.html>. July 9, 2002. Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 (Referred to Senate Committee after being Received from House) (H.R.3763.RFS), April 25, 2002. Washington, DC. Dechow, 1996, Causes and consequences of earnings manipulation: An analysis of firms subjects to enforcement actions by the SEC, Contemporary Accounting Research, 13, 1, 10.1111/j.1911-3846.1996.tb00489.x Efendi, J., Srivastava, A., Swanson, E., 2004. Why Do Corporate Managers Misstate Financial Statements? Working paper. Texas A&M University. Erickson, M., Hanlon, M., Maydew, E., forthcoming. Is there a link between executive equity incentives and accounting fraud? Journal of Accounting Research, forthcoming. doi:10.1111/j.1475-679X.2006.00194.x. Henderson, 2005, Corporate Heroin: A defense of perks, executive loans, and conspicuous consumption, The Georgetown Law Journal, 93 Ivanovich, D., 2002. Senate targets exec’s loans/Ban on aid from companies OK’d. Houston Chronicle, 1 (July 13). Jensen, 2004, The agency cost of overvalued equity and the current state of corporate finance, European Financial Management, 10, 549, 10.1111/j.1354-7798.2004.00265.x Johnson, S., Ryan, H., Tian, Y., 2004. Executive Compensation and Corporate Fraud. Working paper. Louisiana State University. Kahle, 2004, Executive loans, Journal of Financial and Quantitative Analysis, 39, 791, 10.1017/S0022109000003215 King, 2002, Forgiven, Business 2.0, 3 Labaton, S., 2005. A new mood in congress to relax corporate scrutiny. The New York Times, C3, (March 10). Rich, 2005, Facilitating stock ownership through company-sponsored stock option loans, Journal of Compensation and Benefits, 10, 35 Rockefeller, J., 2002. Congressional Record. vol. 148 (93). Washington, DC. (July 11). Ruxton, K.B., 1999. Executive Pay, 1998. Investor Responsibility Research Center, Washington. Sarbanes-Oxley Act of 2002 (Enrolled as Agreed to or Passed by Both House and Senate). (H.R.3763.ENR), July 15, 2002. Washington, DC. Schumer, C., July 12, 2002. Congressional Record. vol. 148 (94). Washington, DC. Thomas, 2000, The determinants of shareholders voting on stock option plans, Wake Forest Law Review, 35, 31 United States General Accounting Office, 2003. GAO-03-395R Financial Statement Restatement Database. Available from: <http://www.gao.gov/new.items/d03395r.pdf>.